The American crisis has shown its harshest face. Triggered 13 months ago by high-risk mortgage credits, it reached its highest point in September, with the shocks suffered by high caliber institutions such as Lehman Brothers and Merrill Lynch. The U.S. government took over management of the country’s two largest mortgage companies, Fannie Mae and Freddie Mac, and borrowed a few billion dollars more to nationalize insurer AIG. On October 3, U.S. Congress approved a R$ 850 billion assistance package, of which R$ 700 billion are assigned to aiding banks. It’s the largest state intervention in the country since the 1929 crisis - and all this in the economy that was the greatest advocate of a free market in the past few years.

The investors left in search of a safe harbor. In Brazil, the main movement was a flight of foreigners who, in the secondary stock market alone, account for about one third of total traded amounts. Local investors did the same. They went after more conservative investments. They put aside multimarket and stock-indexed funds and took up traditional options, like the well-known Bank Deposit Certificate (CDB).

In hedge funds (multimercados) alone, withdrawals adds up to R$ 36 billion accumulated throughout the year, according to data by the National Association of Investment Banks (Anbid). On September 23, net funding was negative by almost R$ 6 billion. The contrast with last year is great. In 2007, hedge funds recorded the industry’s highest net funding, with an inflow of R$ 26.8 billion. Many of these investors saw in the modality a chance to place one foot in the stock market, leaving the other in the safety of fixed interest, but they did not expect that ensuring a profitability similar to that of the CDI would be so complicated. The scenario is also disheartening for stock-indexed funds. Withdrawals for 2008 add up to R$ 9.8 billion, with R$ 615 million in the last month alone. In the investment fund industry as a whole, September completed a sequence of six consecutive months with more withdrawals than investments.

The scenario is not at all similar to the recent past. After Ibovespa’s 17% fall in 2002, the stock market had five consecutive bullish years. Economic stability and Bovespa’s good results attracted new investors – and it is these same investors who are currently going through their first crisis. The trauma should not be compared to the shock of the early 1970s, when the legal framework and quality of the companies that arrived in the market were lacking. But the investors’ disappointment is clear. “We are at a moment of profile equalization”, comments Thiago de Castro, of Tag Investimentos. According to him, many traumatized investors will certainly stand clear of the capital market for a good while. “But at the next bullish trend we will gain new investors, and the current ones will be prepared for bearish periods”, he completes.

This discouragement may have been reflected by ExpoMoney, the largest investors’ fair in Brazil. This year, the fair’s edition in São Paulo began on September 17, the day when Ibovespa fell 6.74% and went back to operating in the 45,000 point range. The 20,000 visitors who attended the event in 2007 fell to only 16,000. But, according to Raymundo Magliano Neto, ExpoMoney director, the reduction is not a result of a bad moment in the market. “Last year, the event had one extra day and the location was more easily accessible”, he says. The way he sees it, the investors who debuted in the stock exchange in the past few years are a lot more aware of the risks and the importance of long-term vision when it comes to the stock market.

To Mercatto Investor Relations director, José Ferreira Neto, it’s important for the investment fund industry to invest more and more in the concept of suitability – a process that identifies the risk that each investor is capable of taking, so as to choose a compatible product. “The investor must also be warned about the composition of a fixed interest portfolio, which can be less volatile, but not necessarily less risky, depending on the negotiables it carries.”

To calm the fears of their customers, resource managers are betting on didactics. Geração Futuro, with 65,000 investors and R$ 6 billion in managed assets, will expand their current staff of 80 consultants in order to meet the rising demand by shareholders fearful of the fate of the resources they invested in stocks. The 40 professionals who tend to São Paulo customers will receive reinforcements in the form of 12 extra colleagues this year. The goal is to double the team in 2009.

Lectures and meetings with investors are an increasing part of Banco Fator’s routine. The private banking segment, though targeted at customers with an investment potential above R$ 1 million, also houses novice millionaires with little expertise in risky investments. For these customers, the bank promotes events that help to understand what is going on in the U.S. economy. “Whenever there’s turbulence, we try to get even closer to the customers”, says Walter Ferreira, Fator’s private banking manager. The segment currently relies on ten advisors, and plans to expand the team by 50%.

In the long term, the best strategy is to rigorously adjust investors’ risk profiles to the products they acquire. Generally, the investor always thinks that he can risk more than his tolerance will allow, especially when optimism prevails. “Three years ago, we promoted an internal restructure and created the position of investment manager, whose job it is to point the shareholder toward the right product”, tells Ronaldo Patah, equity and hedge fund manager at Unibanco Asset Management. The fact is that in other times, the damage to the entire investment fund industry would have probably been much greater.